Shelby Said to Weigh Freeing Banks From Costly Risk Label

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The head of the U.S. Senate Banking Committee is considering a bill that could free about two dozen mid-size lenders, including US Bancorp and SunTrust Banks Inc., from the stringent capital requirements and tough oversight now applied to institutions regarded as too-big-to-fail.

Senator Richard Shelby is putting the final touches on legislation that would mark the biggest changes to the Dodd-Frank Act since its 2010 enactment, including provisions that would rein in the Federal Reserve and probably lead to fewer banks being deemed systemically important, said two people with knowledge of the matter.

The Alabama Republican is considering raising to $500 billion of assets from $50 billion the threshold for lenders that pose a threat to the economy, said the people who asked not to be named because Shelby’s plans aren’t public. That and other measures could change before the banking panel meets next week to discuss the legislation, the people said. The bill would face long odds of passing in the Senate because of probable opposition from Democrats.

If the plan were to become law, regional banks such as US Bancorp, SunTrust and PNC Financial Services Group Inc. might be able to avoid onerous capital and supervision standards imposed on JPMorgan Chase & Co. and Bank of America Corp. -- lenders viewed as so big and interconnected that their collapse could imperil the global economy.

Under Shelby’s proposal, a council of financial regulators would still get to decide whether lenders down to $50 billion of assets require the tougher scrutiny, the people said.

Broader Legislation

The change, which is still subject to negotiation, is being discussed as part of broader legislation that Shelby has been working on for months to ease rules approved in response to the worst financial crisis since the Great Depression. Shelby has scheduled a May 14 meeting of the banking committee to consider the bill, which follows complaints from banks that Dodd-Frank is stifling lending and the economy.

“A committee bill is not yet final and parts are still being considered,” Torrie Miller, a spokeswoman for Shelby, said Thursday.

One provision contemplated by Shelby would create an independent commission to make recommendations on how to restructure the Fed, another person with knowledge of the plan said. The commission’s suggestions would take effect unless both houses of Congress formally object, the person said.

Other provisions under discussion would grant regulatory relief for small community banks and relax some mortgage rules.